Monday, January 14, 2013

It appears that banks have decided to strategically default
by walking away from a property. Homeowners need to understand the potential
risks when a bank decides to abandon foreclosure proceedings against a
property.

We routinely discuss the primary risks of a strategic default. The primary
risks of a strategic default are:

Government action against homeowners that strategically
default. For example Fannie Mae may not allow home loans to individuals who
strategically default. Recently it was reported that the Federal Housing
Finance Agency ("FHFA") intends to aggressively
go after individuals who strategically default on a government insured
home loan. However a FHFA official released
a statement claiming that it will not be the policy to seek out people
who strategically default. The bottom line: The government has its eye out on
strategic defaulters.

We have posted a few excerpts from an informative article
about homeowner's facing personal financial risks for unpaid taxes, utilities,
and/or other property related expenses and/or fines. The article entitled: Zombie
foreclosures terrorize ex-homeowners is a story about "thousands
of homeowners [who] are finding themselves legally liable for houses they
didn't know they still owned after banks decided it wasn't worth their while to
complete foreclosures on them. With impunity, banks have been walking away from
foreclosures much the way some homeowners walked away from their mortgages when
the housing market first crashed."

Theses owners "have had their wages garnished, their credit destroyed and
their tax refunds seized. They've opened their mail to find bills for back
taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter
repair, exterior cleaning and lawn clipping. At their front doors they've
encountered bailiffs brandishing summonses to appear in court. [i]n some cities,
people with zombie titles can be sentenced to probation - with the threat of
jail if they don't bring their houses into compliance."

Keep in mind that the lender's motivation is strictly financial. The lender
received financial benefits for not completing a foreclosure proceeding.
"By walking away, banks can at least reap the insurance, tax and
accounting benefits from documenting the loss — without having to take on any
of the costs and responsibilities of ownership, according to a 2010 Federal Reserve
paper. A walk-away also enables them to 'sell the unpaid debt to debt
collectors, sometimes noting to the court that the loan has been charged
off,'" Read
More at CSMonitor.com